Passionate about IP! Since June 2003 the IPKat weblog has covered copyright, patent, trade mark, info-tech and privacy/confidentiality issues from a mainly UK and European perspective. The team is David Brophy, Birgit Clark, Merpel, Jeremy Phillips, Eleonora Rosati, Darren Smyth, Annsley Merelle Ward and Neil J. Wilkof. You're welcome to read, post comments and participate in our community. You can email the Kats here

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Thursday, 25 November 2010

This handy device is useful for
dealing with unwanted flies in court ...

When one sees the words "fly" and "Shanks" in a shared context, many a reader may involuntarily summon up an unsavoury image of annoying insects hovering around a leading brand of bathroom fixtures, However, this is far from the case with today's post.

Back in December 2009, in the Patents Court for England and Wales, Mr Justice Mann gave a ruling in Shanks v Unilever plc and others [2009] EWHC 3164 (Ch), noted here by the IPKat. The case was a dispute over Professor Shanks' claim for compensation as an employee inventor. The Patents Act 1977, sections 39-42 provides a set of rules for dealing with employees' inventions, as well as for rewarding those inventors whose patents are particularly beneficial to their employers.. Anyway, Mann J's decision hinged on the interpretation of the Patents Act 1977, s.41 which provides, in relevant part:

"An award of compensation to an employee ... in relation to a patent or an invention shall be such as will secure for the employee a fair share (having regard to all the circumstances) of the benefit which the employer has derived, or may reasonably be expected to derive, from the patent or from the assignment, assignation or grant to a person connected with the employer of the property or any right in the invention or the property in, or any right in or under, an application for that patent ...

(2) ... the amount of any benefit derived or expected to be derived by an employer from the assignment, assignation or grant of–(a) the property in, or any right in or under, a patent for the invention or an application for such a patent; or

(b) the property or any right in the invention; to a person connected with him

shall be taken to be the amount which could reasonably be expected to be so derived by the employer if that person had not been connected with him" (emphasis added)

So what were the facts? Shanks' invention led to a patent for measuring activities which was later used in blood testing kits for diabetics. In June 1984 his employer, Unilever Central Resources, transferred the patent to a related company Unilever plc for a nominal consideration. After an initially slow start, Unilever plc licensed its use to various persons and derived licence royalties of around £23m [Enough to buy a reasonably good soccer star, notes Merpel, but not to pay his wages].

Having commenced proceedings for compensation under the Patents Act 1977, s.40, Shanks applied to admit a supplementary statement of case that required consideration of the true interpretation of the words 'that person'. According to the hearing officer, 'that person' referred back to a connected person, and thus referred to that specific person, modified only by considering what that specific person would have done if such a person had not been connected with the employer. He explained his reason thus:

"If a hypothetical person had been intended, the legislator could have said "a person" instead of "that person". As a matter of English, the use of the word "that" would seem to clearly indicate that the specific person previously identified is the one referred to".

He then refused the application. Shanks' appealed successfully to Mann J. The judge was asked to consider whether the 'deemed counterparty' to the hypothetical transaction was the actual counterparty with the connection element removed, but with all the other attributes of that person in place, or whether it should simply be treated as being a normal unconnected arms-length purchaser with no special attributes. In his view Parliament, in using the formulation in question, had intended to refer to a notional non-connected counterparty operating in the appropriate market at the appropriate time. That understanding was not inconsistent with the assumption, in the case of other actual transactions leading to benefits, that an employer was likely to want to exploit the patent properly and not give away its benefits, even though the words used did not impose a positive obligation on the employer to do so. The words 'that person' could not sensibly be taken as being the actual purchaser: to do so would risk introducing absurdity into the hypothesis, leading to absurdity in the result. He said:

"42. I therefore conclude that the hearing officer's final formulation of the meaning of "that person" in section 41(2) is wrong. One does not treat that person as being the precise real person with all the same characteristics (commercial warts and all) as that person has but simply without the connection. I consider that in using the formulation that it did, Parliament was, perhaps a little clumsily, intending to refer to a notional non-connected counterparty operating in the appropriate market at the appropriate time. This is not inconsistent with its assumption (in the case of other actual transactions leading to benefits) that an employer is likely to want to exploit the patent properly and not give away its benefits, albeit (as I have observed) that it did not impose a positive obligation on the employer to do that.".

"31. The Judge only departed from the "natural meaning" of "that person" as meaning the actual assignee because he thought it could produce uncommercial results. But that was predicated on the basis that one is to exclude the known facts about exploitation. Once one brings them in the uncommercial results fall away. And in any event the Judge's conclusion can lead to equally uncommercial results the other way [as Jacob LJ demonstrates earlier in his judgment].

32. In truth this is one of those provisions which is so ill-drafted ... that one has to be guided by its evident purpose (ascertainable from the paradigm case) to ascertain its meaning. My old head of Chambers, Thomas Blanco White QC, used to call this approach to construction of an ill-drafted provision "sewing the fly buttons on the statute"".

The IPKat wonders how many young readers are even familiar with the fly button, the cause of many a problem for whose with poor dexterity or whose fingers were numbed by lack of central heating.

On a brief reading, the decision is about deciding whether you should consider the earnings of an actual person or the earnings of a hypothetical person, whether the past earnings you should consider are the actual earnings the actual person actually made, the hypothetical earnings the actual person didn't actually make, or the hypothetical earnings a hyptothetical person could actually have made, and whether the hypothetical future earnings you should consider should be the actual earnings the actual person will actually make hypothetically based on the actual earnings they did actually make, the actual earnings the actual person could hypothetically make hypothetically based on the hypothetical earnings they didn't actually make, the hypothetical earnings the actual person could hypothetically make based on the actual earnings they actually made, the hypothetical earnings the actual person could hypothetically have made based on the hypothetical earnings they didn't actually make, or the hypothetical earnings the hyptothetical person could hypothetically have made hypothetically based on the hypothetical earnings they could actually have made.

Sorry if this is off topic but the email system isn't working. Will you be giving people an update on just who slandered the UK IPO in one of yor recent articles (recently removed), as Peter Heddin has said that he was not responsible for saying that the UK IPO was now one of the worst in the world? I look forward to your intrepid investigiation.

@ the first Anonymous: I think you would need to read the judgment of Mann J in the High Court in order to understand fully the strained interpretation of "that person" that Jacob LJ considers that Mann J adopted to do justice in the case. Jacob doesn't spend much time in repeating Mann's interpretation, he just focuses on what the words really mean.